National carmaker Proton must cut rivalry between its two auto dealers and streamline its distribution network if it wants to improve market share, Trade Minister Rafidah Aziz said today.

EON, a unit of DRB-Hicom Bhd., was the sole distributor until Proton set up its own distribution arm, Proton Edar, in 1996.

Rafidah said Proton Edar and EON have set up outlets close to each other and often undercut one another to attract a limited clientele, resulting in both companies losing out at the end of the day.

She noted there were also complaints EON dealers were not getting the new Proton GEN-2 model, the first of a new generation of cars that was launched last week.

"Proton is complaining endlessly about competition ... but this is a basic problem they have to solve. You have a nice good car which is not being sold efficiently, you lose out," she told a news conference.

"Please rationalise it. If you want to sell your cars efficiently and have customer loyalty to your car, then you must be able to service them properly and this means having dealers with the optimal space and number of cars to operate."

Association

Rafidah noted there has been attempts by dealers from EON, Proton Edar and second national carmaker Perodua to set up an association under which they could work together but said the government may intervene if things failed to work out.

"We cannot afford to have two-track dealership because the country is not so big and if Proton wants to have good market share," she added.

Proton's market share tumbled to 49 percent last year from 60 percent in 2002 due to fierce competition from its Japanese and South Korean rivals ahead of market liberalisation under the Association of Southeast Asian Nations (Asean) Free Trade Area (Afta).

Its car sales fell by a sharp 27.5 percent to 155,420 units last year. But Proton is pinning its hopes on the GEN-2 and two other new models expected to be launched this year to revive sales.

Proton chief executive Mahaleel Ariff today said that response to the GEN-2 car has been overwhelming, with more than 5,000 bookings two days after it was launched last Friday.

The carmaker has sought another 20 years of tariff protection but Prime Minister Abdullah Ahmad Badawi last week said there would be no new preferential treatment for Proton because it has turned from a "pampered son to become a respected grown-up" with the launch of the GEN-2 car.

Under AFTA, import tariffs for most products in the region were cut to below five percent from last year. Malaysia obtained a two-year reprieve for its auto industry until 2005 but it recently said it would further defer reducing duties to the required level until 2008. - AFP